Good reads from around the Web.
Diehard Warren Buffett fans like me probably already know that the octogenarian outperformer’s latest annual letter will be released today at 1pm UK time (8am EST in his native US).
This year even passive purists who see Buffett as a six-sigma sideshow might be curious, however. Because rumour has it that Warren will be going deeper into why he champions index funds [1].
Update: The 2016 annual later is here [2]. Here’s an except:
There are, of course, some skilled individuals who are highly likely to out-perform the S&P over long stretches. In my lifetime, though, I’ve identified – early on – only ten or so professionals that I expected would accomplish this feat.
There are no doubt many hundreds of people – perhaps thousands – whom I have never met and whose abilities would equal those of the people I’ve identified. The job, after all, is not impossible.
The problem simply is that the great majority of managers who attempt to over-perform will fail. The probability is also very high that the person soliciting your funds will not be the exception who does well.
Bill Ruane – a truly wonderful human being and a man whom I identified 60 years ago as almost certain to deliver superior investment returns over the long haul – said it well: “In investment management, the progression is from the innovators to the imitators to the swarming incompetents.”
Further complicating the search for the rare high-fee manager who is worth his or her pay is the fact that some investment professionals, just as some amateurs, will be lucky over short periods. If 1,000 managers make a market prediction at the beginning of a year, it’s very likely that the calls of at least one will be correct for nine consecutive years.
Of course, 1,000 monkeys would be just as likely to produce a seemingly all-wise prophet. But there would remain a difference: The lucky monkey would not find people standing in line to invest with him.
Nothing really new then, but always class to hear one of the world’s best ever active investors not spinning the line.
Lots else for Buffett fans to dig through too, of course.
Have a good weekend.
From the blogs
Making good use of the things that we find…
Passive investing
- The Transparency Task Force’s response to the FCA Report – T.E.B.I. [3]
Active investing
- Is Halford’s 5% dividend yield a good enough reason to buy? – UK Value Investor [4]
- Howard Marks on cycles, panics, and valuation [Podcast] – Ritholtz [5]
- A nice overview of the recent bull market in junk bonds – Capital Spectator [6]
- Author Wes Gray on momentum investing – Abnormal Returns [7]
- Two ways investors can cope with uncertainty and risk – The Value Perspective [8]
- Pondering political risk in France – Value and Opportunity [9]
- The 2017 Credit Suisse Yearbook – Credit Suisse [10]
Other articles
- Do you want to be rich or do you want to be free? – Financial Samurai [11]
- Win! – SexHealthMoneyDeath [12]
- Is your retirement portfolio less liquid than you think? – Oblivious Investor [13]
- The impact of decreasing retirement spending on safe withdrawal rates – Kitces [14]
- Machines really could take all the jobs [Research Paper] – Daniel Susskind [15]
- Warren Buffett and Bill Gates talk at Columbia University [Video] – Market Folly [16]
- Is Facebook too poweful? – Stratechery [17]
Product of the week: The best one-year savings rate has inched back to the 2% level for the first time in 10 months, reports The Telegraph [18]. But you’ll have to manage the account from challenger Atom Bank [19] over your smartphone. These upstart banks often top the tables, as they need deposits to fund their growing businesses. Once they’ve got the cash they need the deals are pulled, so best move quick if it appeals.
Mainstream media money
Some links are Google search results – in PC/desktop view these enable you to click through to read the piece without being a paid subscriber of that site.1 [20]
Passive investing
- Passive aggressive investing: A guide for beginners [Search result] – FT [21]
- Swedroe: Investors may need to fight their genetics – ETF.com [22]
- Australian active funds are under-performing [PDF, thanks Dominic] – SPIVA [23]
Active investing
- Seems you can tell a lot about a fund manager by the car they drive – ETF.com [24]
- Neil Woodford: Bank stocks are on the mend [Search result] – FT [25]
- A ‘1 or 30’ fee model would give investors a more consistent share of profits – Bloomberg [26]
- ETFs might do investors more harm than good – MarketWatch [27]
- Hedge fund liquidity in danger zone, could proceed a crash – Bloomberg [28]
A word from a broker
- A quick look at the City of London investment trust – Hargreaves Lansdown [29]
- Have all the easy gains been made in fixed income? – TD Direct [30]
Other stuff worth reading
- Get set to get rid of your £1 coins – Guardian [31]
- Warren Buffett’s active lifestyle [Article really about fund fees] – Bloomberg [32]
- How much?! Some hefty estimates for retirement nest egg needs – New York Times [33]
- “Getting divorced? Go after his pension!” [Aka don’t get married…] – Telegraph [34]
- The best and the worst city cycle schemes – Guardian [35]
- How a tiny consultancy helped swing the Leave vote – Telegraph [36]
- Social media is driving Americans insane – Bloomberg [37]
- How a UFC fighter pulled off that £53m heist back in 2006 – Sports Illustrated [38]
- White House bars BBC and others, Trump again declares media “the enemy of the people” [Familiar, right [39]?] – Guardian [40]
Book of the week: I’m still reading A Man For All Markets [41], the autobiographer of Blackjack breaker and quant hedge fund pioneer Edward Thorp. I’m enjoying it, but a few reviewers have found Thorp’s lack of reticence concerning his own genius off-putting. I disagree. Thorp’s telling his story, and he entered the world with a brain the size of a small planet. Better to enjoy the insights. Besides, I’m sure Thorp feels much the same as us mere mortals when he reads, say, John Von Neumann [42]. There’s always a bigger fish out there somewhere.
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- Note some articles can only be accessed through the search results if you’re using PC/desktop view (from mobile/tablet view they bring up the firewall/subscription page). To circumvent, switch your mobile browser to use the desktop view. On Chrome for Android: press the menu button followed by “Request Desktop Site”. [↩ [47]]